A Pleasant Surprise For RCN Capital

Following The Trail Of Pandemic Demand 

As traditional residential mortgage markets were in a state of flux, the business purpose side — focused on non-owner-occupied properties — continued to thrive, something Tesch acknowledged. Investors, undeterred by interest rates, sought to renovate and rent properties, addressing the critical housing shortage. RCN Capital, as a key capital provider, played a vital role in this ecosystem, supplying the necessary resources to fuel investor activities.

“Investors continue to buy homes, renovate them, either sell them into the marketplace or...rent them out to families. Because of the tremendous housing shortage that is still well-documented, we continue to grow,” Tesch explained. “It has quite little to do with the interest rates, and it has a lot to do with the lack of housing and how the investment community is attempting to solve that problem.”

Regional dynamics have also tipped the scale in favor of RCN Capital. Tesch said that for the last few years, the SMILE states – an acronym for a region in the United States that includes the Sunbelt states and is known for its strong job growth, warm weather, and business-friendly policies – dominated loan activity. But following COVID-19, the story changed. Metros like Cleveland, Ohio became hotspots for buyers, namely investors. Tesch explained that the company strategically empowered mortgage brokers across these regions, equipping them with the tools and knowledge to tap into this burgeoning market. RCN’s pivot not only diversified its geographic footprint but also unlocked new opportunities in previously overlooked areas.

But it wasn’t just those small Missouri or Illinois towns that propelled RCN into a record-breaking month. RCN’s Chief Marketing Officer Erica LaCentra says a company goal this year was to be a marketing educator for clients.

"We took a two-pronged approach from the perspective of increasing marketing efforts and then also really highlighting the educational opportunities that we offer to both our broker partners and our correspondent lending partners,” LaCentra explained. 

Free Tools, Free Community

It helps that RCN has an in-house tool to achieve this two-pronged approach. Its self-guided education platform, dubbed Amplify, is a free tool all company partners receive, full of different modules that cover everything from industry acronyms to marketing tactics for specific loan products.

“Amplify started as almost a very bespoke project, and as we continue to invest in the independent mortgage broker community, we thought to ourselves, how can we take the knowledge that we have and provide it to our partners in such a way where they will feel educated and empowered to make these loans? What we wanted to do was provide something that we didn't control. Well, we control the content, but we wanted our partners to control how and when they would use the content,” explained Tesch. “That's when we developed this self-directed program…[our partners] can use it as a tool to educate their employees in such a way that they can have verifiable goals that will help them build their businesses.”

LaCentra added that Amplify has been around for five years, but program amendments happen often. She also says that providing training modules was the catalyst for RCN’s success. “We started doing what we're calling Amplify Office Hours sessions, which focus more on the hands-on aspects of how our wholesale partners can start sourcing investor leads and really start bolstering their businesses with our flavor of lending,” she said.

What LaCentra says surprised her the most about the office hour sessions was the camaraderie that ensued. “We've just found them to create a greater sense of community. People are so open to sharing their own experiences and how they're finding success within private lending, which we've been very pleasantly surprised by,” she commented. “We wanted this to be more like a working session where you're not only hearing from the experts within RCN, but you're also getting that face-to-face with other brokers and other wholesale partners at various levels of their own businesses and being able to talk about what's working for [them], what they’re doing from a marketing perspective or how [they’re] sourcing investor leads.”

Tesch also believes that RCN’s partners following their educational advice was a large influence on August’s numbers. "When we think about, well, how did we get to a record? What we believe it was driven by was independent mortgage brokers adopting our programs and RCN Capital providing them the tools to build out those vertical channels inside their existing residential mortgage businesses,” he said.

Incentivising

In addition to educational initiatives, RCN launched new incentive programs specifically for its Correspondent Lending Partners. These programs not only offered monetary incentives but also provided personalized guidance on improving business metrics, such as production rates and closing times. 

“We piloted an incentive program for our correspondence lenders, which provided monetary incentives based on production. In addition to that, we're taking time with each of our loan officers to go in with their own wholesale clients, their correspondent lending clients, and show them the metrics that, one, we're looking at, areas of how their production, their closing rates, their time to close are, and providing greater insight into just how they can improve their businesses, which has been tremendous,” LaCentra divulged. "We're helping ourselves by helping our clients be better." 

Added LaCentra, “I think we've been putting so much effort towards all of these different endeavors where typically we do see increased production in the summer as it is. We've been having really good months in the summer and increased production. But I think August was the culmination of everything [where we realized that] it's starting to work. Everything's starting to come together. We're hitting our stride, and we're starting to see just that nice upward trend.”

Keeping Momentum

Tesch said he expected a significant drop off in numbers following August’s high, but September saw only a slight dip in activity with a modest decline only about 5% to 10%. Tesch says historically, the last few months of the year – meaning October through December– are big months, and numbers start to teeter off in January and February. August, typically, can go either good or bad, Tesch added. 

“A lot of folks have capital they have to put to use before year-end for tax planning purposes. There's a lot that goes into why the fourth quarter is so good, but we anticipate a very strong fourth quarter,” he explained.

Matthew Lockhart, a seasoned client and direct borrower of RCN, anticipates the momentum will continue. Lockhart says he owns about $120 million in real estate. 

“I was not surprised by RCN’s biggest month,” Lockhart shared candidly. “I haven’t really noticed anything about [its] growth other than a couple of deals together, I just hope that they keep climbing and growing and they’ve been great to me.”